Larry, I've got the same book as well as the updated 1993 edition and read the same thing just a few days ago. I just looked at Red Castle Lake and Grandaddy Lake side by side and would say it's a tough call.

As to Bald Mountain, it's on that ridge, but waaaay down there, so I don't think it's visible.

I think the key word there is 'natural' lake. If you go to the outlet stream which leaves Grandaddy Lake, there seems to be a dam made of boulders there. I'm no expert but it looks man-made. That would leave Red Castle to be the largest of the natural lakes.